Planning and staffing challenges at the Fraser Inn

Fraser Inn

Case Analysis: The Fraser Inn

According to Brian Anderson, it will be easier to determine all that is needed for the business once it is up and running. While that may be acceptable for small, home-based, inexpensive business ventures, it may not be the best approach for a large-scale operation such as The Fraser Inn. One has to question whether a "seat of the pants" approach is the right one when creating a type of business that is beyond the scope of what has been done by any of the principals in the past (Fullen, 2004).

The Andersons are still very young, and they not only lack experience, but they also lack a deeper understanding of all that may be required for the successful operation of their new venture. The fact that they were successful with the All Ours Diner in the past is admirable, but the 20 short months that they operated that business does not really provide enough information as to whether they would be successful in the long-term with something much larger and more complex.

Planning

The planning of The Fraser Inn is a concern for the Andersons. They purchased the property at a good price, and they completed many renovations. However, it does not appear that they considered how much more they would have to spend (or borrow) in order to complete the renovations and purchase everything they needed to get the facility up and running. There was also no mention of licensing, and there did not seem to be a concrete plan regarding how many people they would need to hire or how much they would pay them (Nelson, 2007). Securing a chef was one of their main worries, and they only had a month to do that.

They had no definition opening date, and no specifics about how much they were going to advertise. There was no advertising budget, really, and the Andersons resisted getting any kind of outside help with their venture. However, that help may be something very worthwhile for them, because everything that has been read about the case indicates that the Andersons are hard workers with many good ideas - and that they are in way over their heads. They may not completely realize that yet, but they are denying the seriousness of their lack of planning.

Finances

By far, the largest concern for the Andersons and The Fraser Inn is finances. While they bought the Inn at a good price for the area and they were smart to add some of their own money to keep the amount they had to borrow down, it appears as though they did not take much time to determine how much more money they would need. The fact that they were trying to get a $150,000 loan and the bank seemed reluctant should have given them some indication of the value of their investment and their plans for operation. The second loan they were offered - $200,000 at 14.5% interest, would not have been a good choice. That particular interest rate is higher than many credit cards. The interest rate was not the only issue, either, because the Andersons would have been required to put up more money out of their own pockets and guarantee even more than that in order to be accepted for the loan - options that they did not want to take.

The need for financing may also go beyond the initial outlay and the $150,000 - $200,000 loan. If The Fraser Inn does not quickly start making enough money to support itself and its staff, there will not be money available to purchase food or provide paychecks to the employees. While the Andersons may be willing to work for free for a while because they are trying to get a business started, the people they hire are not interested in working without being paid, and getting a volunteer staff will not be realistic. It appears that the Andersons have underestimated the amount of money that they need in order to ensure that their business gets off the ground and is able to do well for a long period of time. This lack of financial readiness is also evidenced in the Anderson's avoidance of seeking outside help and creating an advertising campaign and budget in order to succeed at their venture.

For example, the Anderson's financial information for The Fraser Inn shows projected food and liquor sales, but there is no plan in place to bring people into the establishment. They need a better financial planning option (Download, 2011). There are already many other restaurants in the local area, and expecting to be successful on only word-of-mouth advertising is not necessarily realistic. The same is true of not bringing people in from the outside in order to help with funding and an understanding of business. There have already been silent-partner offers, and it has been suggested to the Andersons that they consult with business gurus in order to get help with opening and operating their establishment the correct way. These offers have all been rejected, because of the complexity and financial implications of them.

Conclusion

Overall, the Andersons seem to have a great idea. They are interested in what they are doing, and they are dedicated to it. They bought The Fraser Inn at the right price and it is in a great location. Unfortunately, that is not enough to ensure business success - especially in this day of economic uncertainty. Word-of-mouth advertising is certainly one way to get customers, but people have to know about the Inn before they can tell others. If there is no advertising, the Andersons could be setting themselves up for a serious problem. The same is true with their financial concerns. Long-range planning appears to be virtually non-existent, meaning that the Andersons do not really know how they are going to handle specific situations that could arise in the future. If the Inn does not make a profit or they cannot get good staff that will remain with the company, what will they fall back on? That is most likely the biggest issue that the Andersons should consider and discuss.